Nomura now expects a 100bps hike for the Federal Reserve meeting in July after the U.S. Consumer Price Index rose higher-than-expected to 9.1% in June.
The U.S. inflation accelerated at a faster-than-expected rate in June 2022, hitting 9.1% YoY and beating the estimate of 8.8% rise. Core inflation, which excludes food and energy prices, dropped to 5.9% YoY in June, but still higher than expectations of 5.7%.
Prior to the release of June inflation, analysts widely anticipated that the central bank was on pace to increase an interest rate by 75 basis points in July. However, after an acceleration of inflation in June, analysts were shifting toward a full-point rate hike instead.
Nomura is moving toward a more hawkish move, expecting the Fed to increase a key policy rate by 100 basis points in the July meeting to slow down rising inflation, while keeping forecast for the remainder of the year in place with another 50bps hike in September and 25bps hike in each meeting in November and December. The U.S. is expected to see another hike in February 2023 by 25bps before starting a rate cut by 25bps in the September meeting. 2024 should see another 25bps but, according to Nomura.
Additionally, the balance sheet runoff that started in June should end after September 2023.